Princeton university professor Christopher Sims threw the first punch. Monetarists, he said, believe that an expansion of debt is like an expansion of money and can cause inflation. There are two reasons why this view is wrong. The first is that interest is paid on this debt, so it is not free money. More importantly, the newly minted central bank debt, which amounts to more than $5tn (£3tn), is a weak policy that has failed to increase consumer demand and therefore has little effect on inflation.

To go back a step, the expansion of money by central banks, familiar to us as quantitative easing (QE), was sold to politicians as a way to encourage bank lending, increase consumer spending and generate moderate inflation. Sims said QE is weak when governments accompany the bond buying with dire warnings of the need to tackle these debts at a later date – either through cuts in expenditure or higher taxes.

There's too many thoughts in there, and not enough focus. But anyway, Professor Sims says some people think "an expansion of debt is like an expansion of money and can cause inflation." Of course it is, and of course it can. And it has. Look at it from the other side: a shrinkage of debt is like a shrinkage of money and can cause deflation. One of the great concerns of the Federal Reserve in the years since the crisis was to avoid deflation. Back in 2009, for example, Glenn D. Rudebush of the San Francisco Fed wanted to "prevent inflationary expectations from falling too low". He wasn't fighting inflation. He was fighting deflation.

With falling debt comes deflation. With rising debt comes inflation. Professor Sims denies it. Why? Because "interest is paid on this debt, so it is not free money." This is like random thoughts from nowhere.

Yes, interest is paid on debt. It is the cost of keeping money in circulation. The alternative is to snatch a dollar out of circulation -- a dollar of income -- and use it to pay down debt. Until you do that, you are paying interest to keep money in circulation, the money that you borrowed and spent into circulation.

Here's the thing: The interest that we pay to keep money in circulation is an economic cost. For me, it competes with other uses of that money, like going out to dinner once in a while or buying a new computer. For businesses, the cost of keeping money in circulation competes with the cost of labor. Business interest costs compete with business labor costs for business dollars. The more they pay as interest, the less remains for wages and salaries.

"I think you are criticizing Sims for what some reporter confusingly wrote about him."

Yeah, I was a little bit sensitive to that... I did say the thing was "confusingly written". But such statements certainly do need to be criticized -- you can't let them stand as if they were valid. I cant.

You notice, I didn't even give the name of confused guy who wrote the article!

Clonal, good one. My favorite part:"Just to digress for a moment, I will admit that when I first read this paper as an undergraduate I was deeply impressed by his introductory statement, but found much of the rest of the paper incomprehensible."